Details

Subject(s)

• Devaluation of currency [Browse]
• Fiscal policy—Econometric models [Browse]
• Value-added tax—Econometric models [Browse]
• Taxation—Econometric models [Browse]

Author

• Keen, Michael [Browse]

Series

Working paper series (National Bureau of Economic Research) ; Number 17913. [More in this series]

Summary note

This paper focuses on two core tax design issues that arise in addressing current fiscal challenges It first explores the idea, prominent in troubled Eurozone countries, of a 'fiscal devaluation:' shifting from social contributions to the VAT as a way to mimic a nominal devaluation. Empirical evidence is presented which suggests that in Eurozone countries this may indeed improve the trade balance quite sizably in the short-run, though, as theory predicts, the effects eventually disappear. The paper then assesses the wider scope for VAT reform in meeting fiscal consolidation needs, developing and beginning to apply a methodology for finding additional VAT revenue in ways less distortionary and fairer than further raising the standard rate.

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